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Five quarters in a row, Oando PLC has sustained its trend of positive results. The company once again boosted shareholders confidence by reporting N19.8bn in after tax profits in its twelve months ended December 31, 2017 financial results.
Despite the challenging environment that ensued after the company’s 2014 FYE loss including a global oil glut, forex volatility, recession and pipeline vandalism, Oando was able to swiftly develop and execute an alternative strategy to ensure it was able to successfully navigate these headwinds.
According to the Group Chief Executive, Wale Tinubu; “This comes in the wake of oil prices on an upward trajectory, an improved operating environment, the exit of a 13 month long recession and most importantly the continued strengthening of our business model through the effective implementation of our strategic initiatives of Growth through our dollar earning upstream portfolio and deleveraging through asset divestments and the expansion of our oil export trading business.”
Oando’s management team have made concerted efforts to return the business to profitability – reassuring shareholders and investors alike that their investment in the company was a good one.
Some notable actions the company has taken include significant debt and liabilities reduction and a focus on its upstream and dollar earning trading businesses.
In 2016 the company was able to get 11 banks led by Access Bank to give it a N108 bn, 5 year Medium Term Loan, the focus being on medium term and Naira loans which is more manageable and not affected by forex volatility.
Many would have thought that the company’s challenges in 2017; Securities and Exchange Commission’s (SEC) investigation into the company, technical suspension of the company’s shares on the Nigerian Stock Exchange (NSE), and the full suspension of free trading of its shares on the Johannesburg Stock Exchange (JSE) in 2017 would negatively impact operations and in turn the financials of the company but this hasn’t been the case.
In its FYE 2017 results, Oando achieved a turnover 13 percent lower than the comparative period in 2016, N497.6 billion versus N569.2 billion. Despite this slight decrease in turnover the company was able to achieve positives on all other indices.
The company’s gross profit increased by 81 percent to N88.1billion compared to N48.6 billion in FYE 2016; its net debt reduced to N217.1 billion from N230.6 in the comparative period of 2016; and a profit-after-tax of N19.8 billion, 405 percent increase from N3.9 billion in same period of 2016.
The first half of 2017 was challenging for the country as a result of the economic recession, Forcados terminal shut-in which reduced oil production, volatility in oil prices and increased inflation rate.
However, in the second half of the year, the economy improved.
Nigeria recorded a real GDP growth of 1.90 percent year on year (YoY) in Q4 2017, up by 50bps from 1.40 percent recorded in Q3 2017; the country’s foreign reserves grew by 19.4 percent quarter-on-quarter from $32.5bn recorded at the end of Q3 2017 to $38.8bn recorded at the end of Q4 2017; inflation moderated to 15.37 percent YoY in Dec. 2017, representing a 53bps decline from the preceding month.
In the oil and gas sector which is still the mainstay of the country the nation’s oil production increase to an average of 1.9m bpd in Q4 2017 from 1.8m bpd recorded in Q4 2016; whilst the sector grew by 8.4 percent year-on-year and the non-oil sector grew by 1.5 percent – driven largely by activities in the Agriculture Sector (specifically crops), which grew by a decent 4.2 percent YoY in real terms.
Speaking further on Oando’s FYE 2017 financials, Wale Tinubu said; “The business recorded a year-end profit of N19.8 billion; a culmination of 4 consecutive quarters of positive results, validating our promise to shareholders of returning to and maintaining profitability.”
Despite the challenges the company experienced in 2017, Oando recorded some operational highlights. In the upstream sector, Oando recorded an average production of 40,188 boe/day in the 12 months ended December 31, 2017 compared to 43,503 boe/day in the comparative period of 2016. This was primarily due to significant reductions in gas production and delivery caused by the rupturing of Gas Transmission System (GTS-4) gas line and pipeline and terminal constraints at its OMLs 60 to 63.
The upstream business recorded a net profit of N26.33 billion ($86.1 million) compared with N91.83million ($0.3 million) in the comparative period of 2016. This increase in profitability was primarily due to improved revenue between the periods, and increase in gains on financial instruments which were offset by lower tax recoveries.
In the midstream, Oando’s affiliate, Axxela, recorded an 11 percent increase in natural gas deliveries in 2017. This achievement was in spite of restricted gas supply in H1 2017 due to the sabotage of upstream gas supply facilities by militants.
The construction of Phase IV of the pipeline network in the Greater Lagos Industrial Area and the Central Horizon Expansion Pipeline in Port Harcourt were successfully completed. These projects expanded the firm’s distribution infrastructure and enabled it reach a wider demand area for delivery of gas, consequently increasing its customer base to 175 customers.
The Tin can HDD project was successfully concluded; a project which involved restoring leakages at a pipeline that has 2 river crossings so as to reconnect existing customers to the network.
In the downstream, Oando’s trading subsidiary sustained growth in its Crude Oil business resulting in a 9 percent increase in traded volumes. The company continues to solidify its relationships via access to over $700 million of immediately available Structured Trade Finance facilities.
2018 is already looking good for the company. Oando’s positive activities, coupled with the rise in crude oil prices to just over $70 these past months cannot be ignored. Recently, the SEC gave the directive to lift the technical suspension placed on the company’s shares after 175 days. In barley three hours of trading after the technical suspension was lifted, 178 million Oando shares were on bid with only 5.5 million available for sale. The company’s share price hit the NSE daily price ceiling of 10 percent by 10.45 a.m. on its first day of trade and was of the top gainers on the NSE index. As at Friday, 27 April 2018 when the company released its FYE 2017 results its share price had reached N9.15, a 65 percent increase in 21 days.
BALA AUGIE
